7 Small-Cap Biotechs With Bullish Insider Buying in 2011

Insider activity is often worth observing. While such activity is not a pure indicator of when to buy or sell a stock, it is a good starting point upon which to perform analysis or a method of validating analysis already performed. Insider activity might provide an accurate profile of business prospects, based on the insiders' knowledge of the company and industry.

This is a list of seven small-cap biotechnology and pharmaceutical companies that have experienced noticeable net stock purchases by insiders over the last six months. No matter the reason, insider activity is important news that the market must acknowledge. Insiders such as officers, directors, and beneficial owners may legally buy and/or sell stock in their organizations, provided they do not do so based upon privileged information and that they report their trades to the SEC within two business days.

Insider Activity: Insiders purchased over 4.3 million shares, or about 8% of the float.

Note: Short interest is over 10%

Take these insider buys with a grain of salt. While many insiders seem to know what they are doing, many have lost money and also might even consider their insider purchase highly speculative. Also, some might argue that the medical insiders to such companies may not be the best investors to emulate. Additionally, several of these companies have significant short positions, indicating that many individuals in the market strongly disagree with this insider sentiment.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.